Technical Note: Labor Issues in Public Enterprise Restructuring

Abstract

This technical note discusses the impacts of public enterprise restructuring on workers, especially in the case of privatization of state-owned enterprises and private participation in infrastructure services (PPI). While it is widely accepted that privatization and PPI bring benefits at the macro level and to consumers, labor reductions in privatized enterprise are a reality. However, international experience has shown that more often these reforms are undertaken without adequate planning and support of parallel reforms to mitigate negative impacts on labor. A labor adjustment program has to be developed and implemented to address issues of redundant or surplus labor as well as take actions to mitigate the negative impacts of the reforms. Often labor adjustment programs are handled as two components: voluntary retirement schemes and social safety net. The note describes steps for developing and managing a labor adjustment program for privatization and PPI. It concludes, however, that labor issues arising from these reforms are complex and challenging and there is no single approach to address these concerns. Moreover, with clear objectives, careful planning, and adequate resources, labor issues resulting from enterprise and infrastructure policy reforms can be handled effectively. The note aims to guide the Asian Development Bank, its consultants, and the partners in its developing member countries in designing and implementing effective labor adjustment programs.